The Daily Caller

The Daily Caller

How Obama’s last stimulus bill became a comedy of errors

Photo of Jim Powell
Jim Powell
Senior Fellow, Cato Institute

Now that President Obama is on the campaign trail, touting another big stimulus bill, it’s worth recalling how the last one became not just a costly failure but a comedy of errors.

In 2009, his $825 billion extravaganza, touted as an emergency measure, targeted sectors of the economy with the lowest unemployment rates — namely, government employees (2.3 percent unemployed), in particular those in schooling and health care (3.8 percent unemployed). By contrast, unemployment rates in manufacturing and construction were 8.3 percent and 15.2 percent respectively.

Obama’s stimulus provided the least help to states hardest-hit by the recession. For example, according to The New York Times, one of his most important supporters, “Businesses in Michigan, whose 15.2 percent unemployment rate was the highest in the nation, reported creating or saving about 400 jobs. Businesses in Nevada, which had the next-highest unemployment rate, reported 159. And businesses in Rhode Island, which had the third-highest unemployment rate, 12.8 percent, reported the fewest jobs: just six.” Meager though these numbers were, in October 2009 Obama’s top economist Christina Romer testified before Congress that the effects of the stimulus bill were leveling off.

Moreover, the government was embarrassingly slow about getting money out the door, and many economists believe it didn’t stimulate anything. Six months after the stimulus bill became law, less than 20 percent of the money had been spent, and the Obama administration claimed it had funded about 30,000 jobs — not much compared with the approximately 10 million people who were unemployed.

The Associated Press reviewed some of the stimulus contracts and reported that the administration’s claim of 30,000 jobs was exaggerated by about 5,000. White House sources said the administration was working to correct errors. Then, according to The New York Times, Obama administration officials released new information that purported to show the stimulus had “saved or created” 640,239 jobs, of which 325,000 — more than half — were held by members of teachers’ unions.

Officials suggested that because these people had money to spend, they supported hundreds of thousands more jobs — maybe a million jobs altogether. But what the Obama administration did was ask government agencies to estimate how many jobs were “saved or created” by stimulus programs they were responsible for. Naturally, agencies had an incentive to inflate the numbers, since they would be more able to compete for future appropriations if they could claim that they created a lot of jobs. None of these numbers were verified. New York City officials claimed that stimulus money saved thousands of teaching jobs, but Mayor Michael Bloomberg was negotiating a contract to prevent teacher layoffs and thereby avoid a politically disruptive teachers’ union strike in the run-up to his re-election campaign, so it would be hard to credit stimulus money with those jobs.

The Boston Globe reported that, “While Massachusetts recipients of federal stimulus money collectively report 12,374 jobs saved or created, our review shows that number is wildly exaggerated. Organizations that received stimulus money miscounted jobs, filed erroneous figures, or claimed jobs for work that has not yet started.”